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IPE Conference: Asset managers 'relative beneficiaries' of poor scheme governance

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The UK’s Financial Conduct Authority (FCA) should take into account the role of trustees as it conducts its asset management review, according to the chief executive of HSBC’s pension fund.

Speaking at the IPE Conference in Berlin today, Elizabeth Renshaw-Ames welcomed the regulator’s recent wide-ranging review of the asset management sector but called for real solutions for pension-scheme governance challenges when the FCA completes its work next year.

Renshaw-Ames said: “My personal belief is that good governance of pension schemes will deliver better outcomes for members. The UK occupational pension system is fraught with challenges, many of which arise out of an increase of lay people as members of trustee boards.”

Such trustees – typically employee or pensioner members – have ultimate responsibility for the governance of pension schemes, including some legal responsibilities.

For smaller pensions without internal expertise, they will often make asset allocation and manager selection decisions with the aid of consultants.

The lack of support for many trustees means “the asset management industry that services these clients is therefore a relative beneficiary of some of these governance challenges”, Renshaw-Ames argued.

She called for regulators to “grasp the nettle and come up with solutions to improve governance of schemes” to help trustees hold asset managers to account.

The FCA’s interim review, published earlier this month, proposed consolidation among UK pension funds to increase their resources and access benefits of scale.

The regulator also highlighted governance shortfalls within asset management companies, which meant investors found it difficult to judge value for money.

It also criticised a lack of transparency and competition among investment consultants.

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